Transcript What happens when markets are not in equilibrium

The Market Never Stands Still
Non-Price Factors
(“shifters” of Demand)
• Change in consumer income
• Change in tastes and preferences
• Change in the price of a substitute good
• Change in the price of a complementary good
• Change in consumers’ price expectations
• Change in number of consumers in the market
Demand price
Shifts in Demand
Quantity of pecans per day
IRDL the Turtle!!!!
Increase Right, Decrease Left
Pecan Article
• http://online.wsj.com/news/articles/SB10001
424052748704076804576180774248237738
Pecan statements
1. Lunar New Year, Chinese love Pecans on New year
2. Corn syrup, used with pecans to make pecan pie, has
risen in price
3. Price of walnuts increases
4. Household income increases in China
5. Price of pecans drops
6. US trade agreements allow for more pecans to be sold
in more countries
7. Pecan prices expected to be higher next year
8. Famous celebrities seen eating pecans at award
ceremonies
Non-Price Factors
(“shifters” of Supply)
• Change in the cost of productive resources
• Change in technology
• Change in profit opportunities of producing other
products
• Change in producers’ price expectations
• Change in number of sellers in the market
• Change in the government tax or subsidy
Supply price
Shifts in Supply
Quantity of pecans per day
Pecan Statements (supply)
1. US farmers cutting down pecan groves to make way for
more profitable crops
2. Price of pecan-shelling machines rises greatly
3. Price of pecans falls as consumers prefer hazelnuts*
4. Scientists successfully produce genetically modified pecan
trees that can produce twice as much as a normal tree
5. Engineers develop machines that “shake” the nuts out of
trees
6. US gov’t provides subsidies to pecan growers
7. A flood destroys pecan groves in Georgia
8. Pecan producers expect lower pecan prices due to declining
demand for nuts